Canadian financial regulatory authorities are considering putting in place rules for cryptocurrency exchanges in the country.

The Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) released a consultation paper asking for advice from the fintech community on how regulatory requirements can be developed for cryptocurrency platforms.

Andrew J. Kriegler, president and CEO of the IIROC in a statement added:

“The emergence of digital and crypto assets continues to be a growing area of interest.

We must adapt to innovation, and provide clarity to the market about how regulatory requirements might best be tailored and applied to these unique business models while maintaining investor protection.”

The crypto market involves novel features and risks, so the regulators have suggested applying securities laws wherever they can.

For instance, if cryptocurrencies are securities and/or derivatives traded on an exchange, that exchange would be subject to securities and/or derivatives regulatory requirements, they said. Most “utility tokens” have involved the distribution of securities, usually as investment contracts, they added.

The agencies involved think that cryptocurrency platforms are hybrid in nature, meaning they can execute functions of one or more market participants, including alternative trading systems, exchanges, dealers, custodians and clearing agencies.

So, the preparation of a set of “tailored” regulatory requirements to address the risks and features of cryptocurrency platforms is under consideration.

The paper mentions that presently, there is no cryptocurrency exchange in Canada which is recognized as an exchange or is authorized to operate as a marketplace or dealer.

The recent QuadrigaCX incident bought the lack of regulations covering the cryptocurrency industry in Canada into the limelight.

In the QuadrigaCX fiasco, the Canadian cryptocurrency exchange’s CEO, Gerald Cotten, passed away last December, without leaving a way for staff to access the computer storing the failing exchange’s funds. According to reports, QuadrigaCX still owes its customers roughly $190 million in both cryptocurrency and fiat.

Last month, the securities watchdog in the Canadian province of British Columbia, the British Columbia Securities Commission (BCSC), said that it has no remit to regulate the troubled exchange.

The paper is open for public opinion till May 15.

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